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Incorporating Responsiveness to Marketing Efforts in Brand Choice Modeling

Dennis Fok, Richard Paap and Philip Hans Franses

Econometrics, 2014, vol. 2, issue 1, 1-25

Abstract: We put forward a brand choice model with unobserved heterogeneity that concerns responsiveness to marketing efforts. We introduce two latent segments of households. The first segment is assumed to respond to marketing efforts, while households in the second segment do not do so. Whether a specific household is a member of the first or the second segment at a specific purchase occasion is described by household-specific characteristics and characteristics concerning buying behavior. Households may switch between the two responsiveness states over time. When comparing the performance of our model with alternative choice models that account for various forms of heterogeneity for three different datasets, we find better face validity for our parameters. Our model also forecasts better.

Keywords: marketing-instrument effectiveness; heterogeneity; multinomial probit; finite mixtures (search for similar items in EconPapers)
JEL-codes: B23 C C00 C01 C1 C2 C3 C4 C5 C8 (search for similar items in EconPapers)
Date: 2014
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Working Paper: Incorporating responsiveness to marketing efforts in brand choice modelling (2008) Downloads
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